the amounts charged in the cost accounts in respect of overhead charges are as follo 568832

Aug 29, 2021 | Uncategorized

Financial profit and loss account of a manufacturing Company for the year ended 31 March 1998 is as follows:

Rs

Rs

To material consumed
To carriage inwards
To works expenses
To direct wages
To administration expenses
To selling and distribution expenses To debenture interest
To net profit

50,000 34,000 12,000 1,000 4,500 6,500 1,000 15,000

By sales

1,24,000

1,24,000

1,24,000

To net profit shown by the cost accounts for the year is Rs 16,270. Upon detailed comparison of the two sets of accounts it is found that:

  1. The amounts charged in the cost accounts in respect of overhead charges are as follows: works overhead charges = Rs 11,500; office overhead charges = Rs 4,590; selling and distribution expenses = Rs 6,640.
  2. No charge has been made in the cost accounts in respect of debenture interest.

You are required to reconcile the profits shown by the two sets of accounts.

Hint: [Add: Over absorption of administration overheads Rs 90 and S and D overheads Rs 140. Less: Under recovery of works expenses Rs 500 and debenture interest Rs 1,000]